The Tribune

By NEIL HARTNELL

TribuneBusinessEditor

nhartnell@tribunemedia.net

THE Sandals resort chain’s governance and management will not be impacted if the trustee overseeing its late founder’s estate and a $334m cash pile are removed, the Chief Justice has ruled.

Sir Ian Winder, in a June 22, 2023, verdict in favour of Cheryl Hammersmith- Stewart, third wife of Gordon ‘Butch’ Stewart, found that even if Cromwell Trust Company was stripped of its duties this would not overturn “decision-making power” for Sandals. This is because its founder has carefully ensured this remains with a separate ‘Advisory Board’ headed by his son and successor, Adam.

He reached this conclusion in finding that Mrs Hammersmith-Stewart had not triggered a clause in the deeds governing the trust structure established by her late husband, which could have removed her as a beneficiary and prevented her from receiving any assets by launching her legal claim. Sir Ian’s verdict is part of a series of judgments just released by the Supreme Court which lay bare the extent of the battle over the late Mr Stewart’s estate and the divisions it has caused in his family, as well as the lengths several members went to in a bid to keep the dispute from becoming public on the grounds it could damage the Sandals business and threaten their lives.

Tribune Business previously revealed the dispute’s existence after obtaining a heavily blacked-out May 30, 2022, ruling by then-senior justice Indra Charles. That verdict, along with her rejection of an attempt to appeal it as well as Sir Ian’s latest decision, have all now just been made public without any explanation as to why they have been disclosed now.

However, their publication follows extensive efforts by both Cromwell, a private trust company created specifically to manage the trusts created by the late Mr Stewart, and several of his children to keep the dispute and their affairs private by persuading the Supreme Court to “seal” the file.

Had the court agreed this would have kept all legal filings and material related to the battle off-limits the public, and only accessible to the parties and judicial staff. Adam Stewart, Mr Stewart’s son and successor as Sandals Resorts International’s current executive chairman, together with his sister, Jaime McConnell, and brother, Brian Jardim, had joined Cromwell in seeking to have the file sealed.

Brian Simms KC, the senior Lennox Paton partner representing Cromwell, and Sean McWeeney KC, the Graham, Thompson & Co attorney and partner acting for Adam Stewart and his siblings, both argued that the late Mr Stewart’s desire to keep Sandals’ “sensitive commercial information” confidential should be respected because the resort chain is a private company.

The duo argued that disclosure would have a “negative impact” on Sandals’ business affairs, with then-senior justice Charles writing in her verdict: “They contended that a hear- ing in open court would lead to Sandals’ customers and competitors becoming aware of the level of profit made by Sandals, which would in turn lead to those customers effectively squeezing the profit margins of Sandals, damaging the value of the trust assets.”

Justice Charles, in her now non-redacted May 30, 2022, verdict, rejected this argument by the trustee and Adam Stewart and his siblings, adding that “the effects on the trusts and businesses asserted.... are no more than inconveniences”. And she also dismissed arguments that the lives and safety of the late Mr Stewart’s grandchildren would be put in danger if their wealth, and Sandals’ earnings, became public.

Mr Simms had argued that given “the value of the trust assets and the popularity of Sandals, the perceived wealth poses a substantial threat to their safety”. He referred to affidavit evidence from Cromwell asserting that the trustees “have concerns regarding all of the beneficiaries, but that safety concerns for those in Jamaica are exacerbated by the danger there”.

Kidnapping for ransom has become an increasing concern in Jamaica, and Justice Charles noted: “Mr Simms KC also relied on the evidence of Jamie, the mother of some of the minor children in Jamaica, that if such information became public she would have to consider leaving Jamaica.

“Mr McWeeney highlighted the evidence of Ms Gilbert, an insurance broker with expertise in kidnap- ping and extortion risks in Jamaica, that ‘if information about the value of Sandals and Beaches were to get out in the public domain, my advice to you would be to leave the country immediately by private plane’.”

In The Bahamas, the resort assets include Sandals Royal Bahamian in Nassau and Sandals Emerald Bay in Exuma, plus Fowl Cay also in the Exumas. Then-senior justice Charles, however, rejected this argument on the basis that “the evidence relied on in an effort to demonstrate a real risk to the beneficiaries’ safety does not rise to the standard required to warrant a privacy order”.

She also dismissed the subsequent bid by Adam Stewart and his two siblings to obtain permission to appeal her ruling to the Court of Appeal, finding that they were “clutching at straws” and that an appeal had “no realistic prospect of success” and was “palpably weak”.

And then-senior justice Charles also suggested that, by seeking a “stay” of her initial ruling, Adam Stewart and his siblings were trying to delay a request for the Supreme Court to determine whether Mrs Hammersmith- Stewart’s claim violated the trusts’ “no contest” clause. She branded this “the worst sort of satellite litigation geared at delaying applications which ought to be heard expeditiously”.

Sir Ian’s latest verdict, dealing with that “no con- test” application, confirmed that the battle revolves around two Bahamas-domiciled trusts - the Coral Ridge Trust and the Hightree Trust - which were settled by the late Mr Stewart in February 2011 as part of his estate planning to ensure all family members benefited from the wealth he had amassed.

Sterling Trust (Cayman) holds the shares in Cromwell Trust Company, the trustee for the two Bahamian trusts, via another trust known as the Cromwell STAR Trust. Following Mr Stewart’s death, the “enforcer” role, with powers to direct the appointment of Cromwell’s directors, lies with Adam Stewart.

Among the Coral Ridge Trust’s holdings is a 100 percent ownership interest in Oasis Global, a Panama- incorporated company that, in turn, holds all the shares in Sandals Resorts International 2000. The latter owns and operates the Sandals and Beaches resort chains.

Other holdings under the Coral Ridge Trust umbrella include 100 percent owner- ship of Bahamas-domiciled Vinalhaven Holdings, which held $291m in cash as at January 18, 2021, and all the shares in another Bahamian company, Blue Yoda Holdings, which in turn owns the Island Routes group, a tour operator.

Sir Ian, though, noted that governance, decision-making and management powers for the Sandals and Beaches hotel chain lies not with Cromwell or its directors in their capacity as Coral Ridge’s trustees but with an ‘Advisory Board’ headed by Adam Stewart and his sister, Jamie.

The Hightree trust, meanwhile, holds 100 percent ownership in a variety of companies that control real estate assets in The Bahamas, Turks & Caicos and Jamaica, plus vehicles, boats and Sandals’ design and procurement arm and $43m in cash. Among the real estate holdings is property at Old Fort Bay in western New Providence which Mr Stew- art “wished” his third wide and her family to receive upon his passing.

The trust deeds, though, were changed on August 16, 2018, to stipulate that any beneficiary (meaning one of the late Mr Stew- art’s family members) could be excluded from receiving their inheritance if they initiated legal action challenging any provision in the trusts or agreements governing the business entities underneath them.

As a result, Mrs Hammersmith-Stewart sought a declaration that her legal action does not run afoul of this stipulation and could eliminate her interest as a beneficiary. The battle has pitted herself and her children, referred to as the US family, against Adam Stewart and his siblings, described as the ‘Jamaican family’.

Mrs Hammersmith- Stewart is alleging that, in 2019, her husband said he wanted herself and her children to receive $100m from the Hightree trust upon his passing. Then, in a last will dated May 15, 2020, the late Mr Stewart specified that the US family were also to receive “all other homes, apartments or residential units outside” Jamaica even if owned by Sandals and Beaches.

She also claimed that the parent companies for Sandals and two other entities were to be dissolved, and distributed to trusts set up for specific family members, with herself and her children to receive 42 percent.

Mrs Hammersmith- Stewart further alleged that she and her children were to gain 8 percent “veto shares” which, when added to their 42 percent, would give them 50 per- cent voting rights in the family businesses with the “ability to veto shareholder resolutions, protecting our minority position”. And both the US and Jamaican families were to have equal Board representation on these companies.

Sir Ian noted that these arrangements were not signed off by the late Mr Stewart, while the memorandum purportedly providing for the creation of the five new family trusts was allegedly signed by the Sandals founder on January 3, 2021 - one day before his passing. Nor was this memorandum passed to Cromwell.

“Unfortunately, follow- ing the founder’s death, [Cromwell] has refused to implement the founder’s wishes for the trusts,” Mrs Hammersmith-Stewart is alleging. Instead, [Cromwell] has departed or threatened to depart from the founder’s wishes in various ways that would prejudice my and my children’s position.

“I am deeply concerned that the reason Cromwell has departed, or has threatened to depart, from the founder’s wishes for the trusts is that the majority of [its] directors are subject to serious conflicts of interests and susceptible to the influence of Adam” because most are officers and employees of Sandals and therefore owe their jobs and income to him.

Not surprisingly, Adam Stewart and his siblings are disputing Mrs Hammersmith-Stewart’s allegations and her interpretation of the late Mr Stewart’s wishes. The latter, though, is requesting that the Supreme Court order Cromwell’s removal and replacement. The Private Trust Corporation a Bahamas-based financial institution, was named as her preferred successor or candidate for the role of judicial trustee.

Cromwell, after Mrs Hammersmith-Stewart alleged that relations between the two parties had “broken down”, and she had “lost all trust and confidence” in its ability to be impartial, sought the Supreme Court’s determination on whether her bringing legal action violated the “no contest” clause.

Sir Ian, in his verdict, wrote: “Cheryl’s claim in a nutshell is a direct attack on the independence of Cromwell in what she says is the favouring of Adam over her and her children in addition to what she perceives as their failure to carry out the expressed wishes of the founder as the settlor of the trusts.

“The relief sought is that Cromwell be replaced while she pursues this claim. There is no direct attack on any provision of either of the trusts or any other deed of trust or trust indenture declared by Cromwell. It is a direct attack on Cromwell’s performance. The action on its face is not a challenge to the validity of a provision of the trusts.”

The Chief Justice added that, by seeking to remove Cromwell, the action was “an indirect attack” on Adam Stewart’s ability to choose its directors. However, he found it did not eliminate those powers in relation to the Advisory Board that governs the Sandals and Beaches resort chains, and added that it did not “fall squarely into the four corners” of the “no contest” clause.

“The Advisory Board has the reserve power to give directions in relation to the management of Sandals,” Sir Ian noted. “These powers will remain unchanged upon the change of trustee... The Advisory Board, and not either Cromwell or STAR Trust, have decision-making power over the management of the Sandals business.

“To the extent that Sandals is governed or managed, it is managed by the Advisory Board... I therefore accept the submission that Cheryl’s application to remove Cromwell does not affect the position of the Advisory Board, so there is no severing of the link between Sandals and the trusts.”